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Greene v. Will

United States District Court, N.D. Indiana, South Bend Division

June 3, 2019

CARMINE GREENE, et al., Plaintiffs,
KENNETH R. WILL, et al., Defendants, and WESTFIELD INSURANCE COMPANY, Garnishee Defendant.



         As can be seen from the above cause number, this case has some whiskers on it. The case itself was filed more than ten years ago, has been back and forth to the Seventh Circuit, been fiercely fought on some occasions and not at all on others. The underlying facts that led to the dispute go all the way back to the year 2000. That was the year when VIM Recycling, LLC started operating a waste recycling facility in Elkhart, Indiana. [DE 307 at ¶1.] It ran the business on property owned by KC Industries, LLC. [DE 307 at ¶¶1, 2.] Kenneth R. Will was the president and owner of both VIM and KC. [DE 307 at ¶3.] As in previous opinions, I will refer to these three defendants collectively as the VIM Defendants. VIM ran the facility until July 15, 2011, and it proved to be a bad neighbor. VIM was a nuisance both in the legal and colloquial sense, and its behavior led to a huge judgment being issued against it.

         The judgment against the VIM Defendants came about when a group of nearby homeowners decided that they had had enough of VIM's polluting behavior and brought this class action to recover damages for environmental violations, nuisance and negligence based on the impact of the waste facility on their homes and property. The case ended in a default judgment against VIM Recycling and K.C. Industries for $50, 568, 750.00, plus an award of $273, 339.85 in attorney's fees against all three VIM Defendants.

         Unfortunately, the VIM Defendants are judgment-proof, or so it seems. So the Class turned to the VIM Defendants' liability insurer, Westfield Insurance Company, in these proceedings supplemental, hoping to collect on their monumental judgment as covered under any or all of four annual commercial general liability insurance policies effective from January 1, 2004 through January 1, 2008. The matter is again before me on another motion for summary judgment, this time from Westfield, seeking a determination as a matter of law that no coverage lies. Although at one time they were mortal enemies, the Class and the VIM Defendants are now aligned. In opposing summary judgment, the Class has obtained an affidavit from its former nemesis, Mr. Will. They have joined forces because both have an interest in having Westfield bear the cost of the VIM Defendants' tortious conduct.

         Undisputed Facts

         The parties have complied with my instructions on the presentation of allegedly undisputed facts. [DE 300 at 1.] The result is a document of 72 pages, enumerating 272 facts asserted by Westfield and containing the Class's response to each. As I incorporate undisputed facts, I will cite to the paragraph number in the Class's response, where cites to supporting evidence of record are set out. There are three lawsuits that are important to the issue before the court. First, there is this case which I will refer to as either the “Federal Action” or simply “this case.” Second, there was a state case which I will refer to as the “State Action.” And third, there was another federal lawsuit in this district, a declaratory judgment action before Judge Van Bokkelen, on whether Westfield had a duty to defend and indemnify the VIM Defendants in the State Action. For clarity's sake, I will refer to that case as the “Judge Van Bokkelen” case.

         The Policies' CGL Coverage Form contained “Duties In The Event of Occurrence, Offense, Claim or Suit.” [DE 307 at ¶262.] These include that the insured “must see to it that we are notified as soon as practicable of an ‘occurrence' or an offense which may result in a claim.” [Id.] The notice should include, to the extent possible, the “[h]ow, when and where” of the occurrence or offense, the names and addresses of injured persons and witnesses, and the nature and location of any injury or damage. [Id.] Prompt written notice to Westfield of any claim or suit “as soon as practicable” is expressly required. [Id.]

         This case was filed against the VIM Defendants on October 27, 2009. [DE 307 at ¶180.] Will did not direct the VIM Defendants' insurance agent, 1st Source, to notify any insurance carriers regarding this case when it was filed. [DE 307 at ¶181.] Instead, the VIM Defendants retained Plews Shadley Racher & Braun LLP (“Plews Shadley”) to represent them. [DE 307 at ¶182.] Plews Shadley filed a motion to dismiss based on various abstention grounds, and on April 21, 2010, I dismissed the Federal Action for lack of subject matter jurisdiction over the Neighbor Plaintiffs' claims brought under RCRA. [DE 307 at ¶184.] I declined to exercise supplemental jurisdiction over the remaining state law claims. [DE 38 at 18.] The Neighbor Plaintiffs appealed the dismissal of the Federal Action to the Seventh Circuit Court of Appeals. [DE 307 at ¶185.]

         While this case was pending in the Seventh Circuit, on May 24, 2010 the Neighbor Plaintiffs initiated a second, nearly identical lawsuit in Elkhart County Superior Court, captioned “Jerry Adkins, et al., Plaintiffs, v. Kenneth R. Will, et al., Defendants, Cause No. 20D01-1005-CT-00038, Elkhart Superior Court No. 1.” [DE 307 at ¶186.] Once again, the VIM Defendants did not direct 1st Source to notify any insurance carriers regarding the State Action at the time it was filed. [DE 307 at ¶187.] The VIM Defendants initially retained Robert Sanders of Sanders Pianowski LLP to represent them in the State Action. [DE 307 at ¶188.] In or about October 2010, Will learned that Mr. Sanders had a conflict of interest that would prevent him from representing the VIM Defendants in the State Action, and therefore, in consultation with Amy Romig of Plews Shadley, Will instructed its insurance broker, 1st Source, to notify certain insurance carriers for the VIM Defendants regarding the existence of the State Action and seek coverage for the State Action. [DE 307 at ¶189.]

         On October 1, 2010, Lisa Cromwell, a Westfield Claims Specialist, received a “General Liability Notice of Occurrence/Claim” from 1st Source, notifying Westfield that the VIM Defendants had been sued in the State Action and that the VIM Defendants sought coverage for the State Action under the Policies. [DE 307 at ¶190.] Upon learning of the State Action, Ms. Cromwell contacted Bruce Clark, Esq. of Bruce P. Clark & Associates to serve as Westfield's assigned defense counsel for the VIM Defendants in connection with the State Action, pending an investigation of coverage. [DE 307 at ¶192.] I am emphasizing that notice was given of the State Action because conspicuous by its absence was any notice of the Federal Action which at that point was still pending appeal.

         On or about October 14, 2010, Stephen St. Clair, a Westfield Litigation Specialist, learned of the State Action and was asked to handle the coverage investigation for Westfield. [DE 307 at ¶193.] St. Clair contacted Mark Smith, Esq. of Smith Fisher Maas & Howard, P.C. to serve as Westfield's outside coverage counsel in connection with the investigation into coverage for the State Action. [DE 307 at ¶194.] On October 14, 2010, Smith informed St. Clair that the Neighbor Plaintiffs had previously sued the VIM Defendants in the Federal Action but that the suit had been dismissed for lack of subject matter jurisdiction and was on appeal to the Seventh Circuit Court of Appeals. [DE 307 at ¶195.] This information from attorney Smith on October 14, 2010 was the first time anyone at Westfield became aware of the existence of the Federal Action. [DE 307 at ¶198.]

         Westfield took immediate action related to the State Action. It did an investigation related to coverage and thereafter, as Westfield's coverage counsel, Smith sent a letter to Will on behalf of the VIM Defendants on February 4, 2011: (i) notifying Will that Westfield had completed its coverage investigation; (ii) informing him that Westfield had concluded that it had no duty under the Policies to defend or indemnify the VIM Defendants in the State Action; and (iii) reserving all of its rights under the Policies. [DE 307 at ¶211.]

         Westfield then sought a declaratory judgment against the VIM Defendants and the neighbor class. The case, Cause No. 3:11CV159 filed in this court on April 18, 2011, was assigned to Judge Joseph Van Bokkelen. In its complaint, Westfield noted the pendency of the State Action as well as the pending appeal of the Federal Action, but the relief sought was a declaration that Westfield had no duty to defend or indemnify the VIM Defendants in the State Action. Defaults were entered against the three VIM Defendants on July 18, 2011 and the declaratory judgment Westfield wanted against the VIM Defendants was granted by default on September 1, 2011. [3:11CV159, DE 18, 19, 20, 27, 28, 29.] As for the neighbors, they entered into a Stipulation with Westfield, so ordered by Judge Van Bokkelen, that Westfield had no duty to defend or indemnify the VIM Defendants against the State Action. [Id. at ¶ 30, 31.] The Stipulation was based on Westfield's allegation that the VIM Defendants did not timely provide Westfield “with notice of the [State] Lawsuit or the extensive history of the environmental issues outlined therein.” [DE 30 at 8; DE 31 at 8.]

         Meantime, on appeal, the VIM Defendants were represented by Ms. Romig of the Plews Shadley law firm. On May 3, 2011, the Seventh Circuit reversed and remanded this case, and it was reinstated to my docket. See Adkins v. VIM Recycling, 644 F.3d 483 (7th Cir. 2011). Mysteriously, at no time, from the filing of the Federal Action through its appeal and reinstatement by the Seventh Circuit or thereafter, did Will or 1stSource ever seek or request coverage from Westfield for the Federal Action. [DE 307 at ¶236.]

         The Default Judgment

         After the remand, the Class amended the complaint to add defendant Soil Solutions Company, which had purchased the assets of VIM in July 2011 and was alleged to be the successor in interest with respect to the facility's continuing operations. [DE 66 at ¶13.] Counsel for the VIM Defendants was permitted to withdraw in December 2011. [DE 105.] Defendant Will advised the court in February 2012 that he intended to represent himself, but a default was entered against him in January 2013 for his failure to plead or otherwise defend against the amended complaint. [DE 113, 162.] Default was entered against VIM Recycling and KC Industries in March 2012, after their counsel had withdrawn and they failed to obtain new representation to defend them against the amended complaint. [DE 120, 125, 126.]

         The Class was certified in April 2013. [DE 176.] After Soil Solutions of Elkhart LLC was added as a defendant in a second amended complaint [DE 152], the Class settled their claims against the Soil Solutions defendants, and their proposed settlement was approved and a consent decree issued in June 2014. [DE 207.] Under the consent decree, Soil Solutions agreed to wind down the operations of the wood-waste processing facility, to place a restrictive covenant on the property prohibiting solid waste management operations on the site, and not to sell or lease the site to any entity engaged in a list of prohibited types of operations. [DE 207 at 5-7.] Finally, the claims against the VIM Defendants were disposed of by the default judgment imposing joint and several liability on VIM Recycling and K.C. Industries in the total amount of $50, 568, 750.00, and awarding the Class litigation costs of $273, 339.85 against all three VIM Defendants, jointly and severally. [DE 228.]

         Procedural History of Proceedings Supplemental

         The Class initiated these proceedings supplemental against Westfield within a few months after the entry of the default judgment. [DE 235.] Westfield met the matter with a motion for summary judgment arguing that the disposition of Judge Van Bokkelen's case had res judicata impact here barring the Class's claims for coverage of the judgment in this case. [DE 256, 259.] I denied the motion because Westfield's complaint and Judge Van Bokkelen's Agreed Judgment expressly addressed only a defense and indemnification for the State Action. [DE 270 at 8, 12.]

         Next came a motion by the Class for partial summary judgment, in which they argued that Westfield had breached its duty to defend the VIM Defendants in this case, and as a result was equitably estopped from asserting policy defenses against the Class's claim for indemnification. [DE 273, 274.] That motion was also denied, largely because the record did not then disclose sufficient information about when and how Westfield received notice of this litigation against its insured to determine when (if at all) a duty to defend was triggered. [DE 288 at 10.] I also noted my reluctance to resolve the proceeding “on less than a full exploration of all the facts and legal arguments relative to Westfield's liability under the policies.” [Id. at 13.] The third “omnibus” summary judgment now before me [DE 301], filed after the close of discovery in these proceedings, represents that full factual record and broad scope of argument.


          Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A party opposing summary judgment may not rely on allegations or denials in her own pleading, but rather must “marshal and present the court with the evidence she contends will prove her case.” Goodman v. Nat'l Sec. Agency, Inc., 621 F.3d 651, 654 (7th Cir. 2010). Summary judgment “is the put up or shut up moment in a lawsuit, when a party must show what ...

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